VEETC

Doug Koplow of the policy consulting firm Earth Track said that the mandate is effectively another kind of subsidy for ethanol, and warns that it may be difficult to come up with new alternative fuels without adverse environmental impacts.

While there has been some enthusiasm about biofuels from switchgrass, cornstalks and algae, Koplow said, "I think people are painting that as too rosy a picture."

Below is an article on the end of VEETC titled "Looking at Life With an Ethanol Subsidy," published in Farm Futures on December 28th. In only a few short paragraphs, it captures so much of the industry spin on these issues over the years that is provided a great framework for calling them out. A link to the article is here.

Lots of action on the biofuels front to talk about: VEETC near death? Corn wiggling its way into advanced ethanol and biodiesel mandates. E15 gets a cool new warning label, but auto makers steer clear.

With pressure building in Congress to strip out at least the most obvious subsidies to oil and gas, Taxyapers for Common Sense has released a new tally of some of the major ones. The report is useful in providing updated cost estimates, and for going beyond the narrow set of provisions that the legislation has targeted. For example, they pick up the billions in losses due to negligence by the Minerals Management Service in structuring lease contracts for 1998 and 1999 that resulted

Earth Track presentation at the Biofuels Policy Forum briefing on April 14, 2011 in Washington, DC. The document provides an overview of the historical and projected level of subsidization to biofuels, and why this policy is not an efficient way to address concerns over greenhouse gas emissions or energy security.

In the area of fixed income, one shouldn't be betting against Bill Gross of Pimco. The man is a walking, talking fixed income encyclopedia and routinely makes astute calls on bond trends and pressures. In March his total return fund (PTTRX) went to zero on US Treasuries. In April, he supposedly went short (update here).

Subsidy arbitrage in international trade is not a new issue. It is popping up again in the biofuels sector, this time regarding the collection of ethanol blending credits on fuel that is then shipped out of the United States. Not surprisingly, producers in the receiving markets are not happy about it. Robert Rapier has writting a good overview of the issue and the industry's denials (

During the early part of 2010, when the volumetric ethanol excise tax exemption (VEETC) looked like it was heading towards elimination, ethanol industry contortionist Bob Dinneen of the Renewable Fuels Association worked hard to paint the subsidy as vital to all things American. In yet another RFA-sponsored study by the industry's favored economist John Urbanchuk, RFA set out to quantify the bad things that would happen if VEETC expired. They came up with quite a list, summarized by

Ethanol blenders credit moves forward towards extension at current rates in the Senate. Even more ludicrous since even without the excise tax credit subsidy we are still forced to buy the stuff at above market prices under the federal Renewable Fuel Standard.

Chuck Grassley makes a good point when he argues that you can't treat ethanol and oil subsidies differently:

Faced with expiration of the ethanol blender's credit in only a few months, the ethanol lobby has been working the halls Congress to fashion together a fallback mix of subsidies -- even though mandates to use ethanol in vehicles remains in force. Taxpayers for Common Sense summarizes the state of play, including assorted loan guarantees, support for new pumps and pipelines, and extension of the blender's credit, albeit at a slightly lower rate.